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The directors of Dhaka Stock Exchange (DSE) are at loggerheads over a regulatory move taken to issue new TREC (Trading Right Entitlement Certificate) required to conduct trading business by aspirant local and foreign companies.
Two incumbent shareholder directors, also ex-presidents, of the premier bourse DSE have expressed opposite opinion on the draft rules already published in newspapers seeking public opinion.
The fissure surfaced after the DSE Brokers Association issued a legal notice to the premier bourse calling it to submit a note of protest on the draft rules to the securities regulator.
The association also said the securities regulator has no right to set criteria for issuing brokerage licence.
But the stock market regulator said they are the only one entity having right to formulate any kind of rules and the draft on new TREC was formulated in line with the Demutualisation Act, 2013.
Talking to the FE, one of the directors of the DSE supported the criteria and process of issuing new TREC to establish the objective of demutualisation, while another one differed with the criteria of new TREC holders mentioned in the draft rules.
A company having a minimum paid-up capital of Tk 30 million, can get TREC paying registration fee of Tk 0.5 million subject to fulfillment of other criteria, according to the draft rules.
DSE director Md. Shakil Rizvi said three shareholders, out of four, of the premier bourse were against the exchange's opinion sent on the draft rules to the BSEC.
"The existing TRECs can be sold at a price around Tk 200 million. Then, how is it possible or logical to allow a company having a paid-up capital of only Tk 30 million to get a TREC paying the registration fee only of Tk 0.5 million," Mr. Rizvi said.
He said the exchange should issue new TREC through 'auction' to maintain a balance between the prices of the existing and new TRECs.
"Otherwise, the proposed registration fee should be increased," said Mr. Rizvi , also a former president of the DSE.
Another DSE director Md. Rakibur Rahman said the objective of demutualisation was to separate the ownership from the management to ensure transparency in the activities of the stock exchanges.
He said the government allowed the existing shareholders to conduct trading business for a period of five years without creating scope for new ones.
"We have availed the facility. Now, the reluctance of issuing new TRECs indicates that the existing shareholders want to continue monopoly business without allowing aspirant candidates," said Rakibur Rahman, also a former president of the DSE.
He said many of the existing brokerage firms of the DSE have been conducting business with a very insignificant amount of paid-up capital for a long time.
"Under such a situation, why do the existing shareholders oppose the amount of paid-up capital set for a company willing to get new TREC from the stock exchange?" Rakibur Raham said.
He said a total of 79 existing brokerage firms of the DSE are conducting trading business with paid-up capitals amounting up to Tk 30 million.
"The paid-up capitals of six brokerage firms are still below Tk 10 million. So, the objection raised agaisnt the paid-up capital of Tk 30 million, mentioned in draft rules, for new TREC is baseless," Mr. Rakibur Rahman said.
He said the objective of demutualisation is yet to be fulfilled in the DSE as the shareholder directors often try to influence the decisions of the management.
"The DSE board submitted its opinion on the draft rules of Exchange's Demutualisation Act 2103 on the basis of the consensuses given majority number of members," Rakibur Rahman said.
In its legal notice served to DSE, the DBA said the stock market regulator has no right to set criteria for issuing new broker licences.
The BSEC official said the regulator has completed the initial process of issuing new TREC as per the Exchange's Demutualisation Act, 2013.
"The BSEC is only one entity that owns the right of formulating all kind of capital market related rules. That's why the securities regulator has formulated the draft rules for issuing new TREC," said BSEC executive director Mohammad Saifur Rahman.
The section 24 of the Exchange's Demutualisation Act 2103, said the commission can issue an order or directive, if required, to an exchange, or its shareholder or TREC holder, or a committee, or a committee member, to fulfill the object this law.
The section 16 (4) of the Exchange's Demutualisation Act, 2013 said an exchange can increase the number of TRECs after five years of completing demutualisation subject to special decision taken at the meeting of shareholders.
BSEC executive director Mr. Rahman said the DSE has not taken any initiative to issue TREC despite six years and six months have already passed after completing demutualisation process.
The DSE completed its demutualisation process on November 21, 2013 and five years of completing demutualisation ended on November 20, 2018.
On May 29, 2019 the securities regulator sought opinion from the DSE on the draft rules and later gave several reminders to the premier bourse for submitting its opinion.
"Finally, the DSE submitted its opinion on March 16 last," said BSEC executive director Mr. Rahman.
The section16(10) of the Exchange's Demutualisation Act also said TREC can be issued, postponed and suspended by a demutualised exchange in line with the specific process set in the rules.
The securities regulator has also included this provision in the draft rules for issuing new TREC.
As per the existing rules, the draft rules will have to be published as gazette notification before seeking public on the draft.
Asked, BSEC executive director Mr. Rahman said the regulator was unable to publish the gazette notification timely due to public holiday started from March 26 last.